Inflation

Inflation --> a rise in the change of price over a period of time
Deflation --> a decrease in the change of price over a period of time

How to measure inflation
Inflation is the gradual change of all prices over a period of time. The prices of goods and services vary through time, and it is measured by the CPI (consumer price index).

How to Calculate CPI
To calculate the CPI, you start off by collecting data about the prices from a basket of goods. Then you compare these prices with the prices from a base year, which will be 100%. If the price of the goods rises, you will see that the price index would rise too.










Compare the total cost of the first year ($10) with the total cost of the second year ($14).
$14 - $10 = $4

The difference is $4. You then take the difference and divide it by the total cost of the first year.
$4 / $10 = $0.4

To get a percentage, you multiply it by 100.
$0.4 x 100 = 40

This shows that the inflation rate was 40%.


Demand pull inflation
This is when there is inflation due to an increase in demand. Many people think that Jessica Alba is smoking hot. So many boys buy Jessica Alba posters to stick on their ceilings. There is a high demand for Jessica Alba posters but there aren't enough made. The prices rise because the supply is low but the demand for it is very high. Basically, if demand goes up, it pulls the prices up.

Cost push inflation
This happens when the cost of the production of a good rises. An easier explanation of this would be if the cost making another Megan Fox movie rises such as lighting, sound/visual effects and staff members. The movie producer would have to raise his/her ticket price to still be able to gain profit.